Stephanie Bertels: Why Is It Increasingly Important for Boards to Clearly Signal Their Position on ESG Issues?

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Jul 15, 2019
by Stephanie Bertels
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Stephanie Bertels: Why Is It Increasingly Important for Boards to Clearly Signal Their Position on ESG Issues?

Academic Stephanie Bertels explores the growing importance of environmental, social and governance (ESG) issues for the corporate sector for this month’s Salzburg Question for Corporate Governance

This article is part of the series, the Salzburg Questions for Corporate Governance by the Salzburg Global Corporate Governance Forum

As an academic working at the intersection of corporate governance and sustainability, I end up chatting with executives and directors in global companies quite regularly. Lately, directors are asking whether their company should be taking a public position on one or more environmental, social, or governance (ESG) issues. “It used to be just the NGOs or the SRIs (socially responsible investors) asking for this, but now even mainstream investors are asking,” they will say. Even the central banks have started to get in on the action, viewing climate change as a threat to financial stability. 

It started decades ago with the pressure to issue a sustainability report, but a string of incidents ranging from the Rana Plaza building collapse and the Volkswagen emissions scandal to PG&E’s “climate-driven bankruptcy” have raised questions about what other environmental, social, and governance risks may lurk within. 

And yet despite these issues, or perhaps because of them, the world is looking to the biggest companies to clearly articulate what role they will play in solving some of our most intractable problems and to clarify how they will contribute to the achievement of the Sustainable Development Goals (SDGs). 

Boards need to respond

As demands for corporate social and environmental responsibility expand and intensify, investors are demanding a clear position from management and the board, one that includes specifically addressing the company’s understanding of the context in which it operates and clarifying its role and commitments to address key environmental and social challenges.

But our research is showing that this isn’t just a paper exercise. By developing position statements, boards and executive teams deepen their understanding of these issues in the context of their business, clarify the link to the company’s overall strategy, clarify their position for other key stakeholders, and provide the direction and confidence for management and employees to act. 

What does “good” look like when it comes to a position statement?

That’s a question that keeps surfacing in my conversations with directors. To provide an answer, we analyzed over 3,000 board position statements, finding that too often, they were lengthy documents that failed to make a clear strategic connection between the issue and the implications for business decision making. 

Our guide on Next Generation Governance, provides a framework to help companies produce more credible and concise position statements. 

A good position statement will do three key things: 

  1. Explain your company’s understanding of the issue including what you see as relevant limits; 
  2. Clearly link the issue to your business strategy; and
  3. Make a credible commitment to take appropriate actions.

It’s that credible commitment piece that many companies are struggling with. It means that for each relevant issue, your company needs to talk with stakeholders to understand the key system limits and what it would take for your company to operate within them. 

Companies are increasingly expected to take a position on carbon

One issue that is taking front and center is the climate crisis. Of the statements we reviewed, over 2,000 of them related to climate change and momentum continues to grow fueled by two key trends. 

First, the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) released guidelines asking companies to engage in scenario-planning and to disclose their climate-related risks. While currently voluntary, it is expected that regulation on mandatory climate risk disclosure is sure to follow.

Second, there are a multitude of initiatives pressing companies to set a science-based target in alignment with a 1.5°C reduction pathway. Despite this, a recent study of 274 of the largest publicly traded, high-emitting companies found that almost half do not adequately consider climate risks in their operational decision-making and only an eighth are reducing carbon emissions at the rate required to keep global warming below 2°C, let alone 1.5°C. 

To be viewed as credibly engaging on climate, investors and other stakeholders will want you to articulate a clear position. For those ready to do so, this guide can help. 

Have an opinion? 

We encourage our readers to share your comments by joining in the discussion on LinkedIn.


Stephanie Bertels is the director of the Centre for Corporate Governance and Sustainability at Simon Fraser University's (SFU) Beedie School of Business in Vancouver, Canada. She founded and leads the Embedding Project, where she works with dozens of global companies to help them embed sustainability into their operations and decision-making. Stephanie developed an online knowledge portal (www.embeddingproject.org) featuring a curated selection of the most relevant corporate sustainability resources - including practical guides and tools developed through her own research. Her most recent work draws upon a review of over 3200 board position statements and interviews with over 200 global CEOs and board chairs to explore how corporate governance and corporate strategy processes are shifting to account for environmental and social constraints. She has previously worked as an environmental engineer and is a trustee and chair of SFU's Academic Pension Plan. She has a Ph.D. in strategy and global management and sustainable development from the University of Calgary, an M.Sc. in petroleum engineering from Stanford University, USA, and a B.Sc. in geological environmental engineering from Queen's University. Stephanie is a Fellow of Salzburg Global Seminar.

The Salzburg Questions for Corporate Governance is an online discussion series introduced and led by Fellows of the Salzburg Global Corporate Governance Forum. The articles and comments represent opinions of the authors and commenters, and do not necessarily represent the views of their corporations or institutions, nor of Salzburg Global Seminar. Readers are welcome to address any questions about this series to Forum Director, Charles E. Ehrlich: cehrlich@salzburgglobal.org To receive a notification of when the next article is published, follow Salzburg Global Seminar on LinkedIn or sign up for email notifications here: www.salzburgglobal.org/go/corpgov/newsletter